Hopeful bank rehabilitation plan
There seems to be light at the end of the tunnel for the uninsured depositors of shuttered Export and Industry Bank who have a combined deposit of P10.7 billion.
According to reports, Union Bank of the Philippines has informed the Bangko Sentral ng Pilipinas of its interest in rehabilitating EIB as part of its preparations for the integration of the economies of Asean countries in 2015.
The lifeline offered by the Aboitiz-led universal bank involves the infusion of still-to-be-determined capital into EIB and the restructuring of the terms of the uninsured deposits.
Unionbank has proposed the conversion of certain portions of those deposits to equity and the balance will be treated as interest-bearing deferred time deposits.
This scheme has gained the approval of majority of the uninsured depositors who consider it a better alternative to the earlier plan of the banking regulators to liquidate EIB’s assets.
In case of liquidation, the uninsured deposits (or anything beyond the P500,000 cut off deposit covered by deposit insurance) would either be repaid in proportion to whatever may be recovered from the sale of the bank’s assets after deducting its liabilities, or none at all if nothing is left after settling the debts.
By and large, Unionbank’s rehab plan does not deviate much from earlier schemes that the BSP and Philippine Deposit Insurance Corp. used in previous bank failures.
Preferred stocks
The conversion of portions of unpaid deposits to equity considerably eases the financial burden the rescuing bank takes on during its initial entry.
The favored consideration for the swap is non-voting preferred shares because, first, it does not disturb the existing corporate voting structure; second, the regulatory approvals for this process are easier to secure; and, third, the bank can determine ahead of time how much to set aside for dividend payments and redemption of the shares in the future.
On the short term, to appease disgruntled depositors, a small percentage of the unpaid deposits is required to be paid as soon as possible, or after some assets or receivables of the shuttered bank have been sold or recovered.
If the white knight happens to be in a generous mood, it may offer to source the partial repayment from its own coffers.
The point is, there is really not much evaluative work to be done on Unionbank’s offer.
After all, the financial records of EIB have been reviewed and dissected many times already.
Except for some adjustments to reflect the results of Unionbank’s due diligence review of EIB’s books, it is fair to say that the regulators can quickly decide on the latest rehab offer.
Interests
Time is not on the side of the uninsured EIB depositors. It’s been two years since the bank was placed under receivership by the BSP.
Who knows how many depositors have died or been forced to mendicancy since they were barred from recovering their hard earned money? Or how many businesses had to close shop and terminate the services of their employees because their funds were locked at EIB?
Or how many educational, retirement and other personal plans of depositors had to be shelved due to their failure to get back the money they entrusted in good faith to EIB?
Every day of delay in the resolution of the rehab plan adds to the agony of waiting of the uninsured depositors.
As if suffering from the ineptitude of the banking regulators was not enough, PDIC put legal roadblocks last year on the offer of Banco de Oro Unibank to take over EIB’s operations.
There is no seller’s market in this country for failed banks. Unionbank could be the last big league bank that may show interest in rescuing the uninsured depositors from financial distress.
Size and financial heft matter in the rescue of ailing banks. The regulators should know that. They have been through that exercise many times before.
Pressure
The beleaguered depositors made the right move to authorize a group called “Coalition of EIB Uninsured Depositors” to work on their behalf for the rehabilitation of EIB.
With some P10.2 billion of their hard earned money at risk of disappearing through no fault of their own, the depositors simply have to fend themselves.
They cannot expect the former bank officers to fight their battle because they are busy fending off criminal charges of having engaged in unsafe and unsound business practices that led to the bank’s closure.
Besides, they have already secured their future with the retirement nests they have built for themselves.
If necessary, the depositors should use social media to convince (or better still, pressure) PDIC into giving serious consideration to the rehabilitation, not liquidation, of EIB.
Finally, it would be in the depositors’ best interests not to solicit the support or assistance of congressmen and senators to avoid political color from staining their action.
With the pork barrel scam still fresh in the people’s mind, the involvement of lawmakers will not add value to (and worse, may even devalue) the merit of the depositor’s claim for recovery of what are rightfully due them.
With PDIC’s help, the light at the end of the tunnel is not from a train that will crush the hopes of the depositors for good.
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